Does Your Nonprofit Promote Stock Gifts? You Should!

What size bucket do you ask donors to share from?

Guess what strategy you’re likely not using enough that really works to facilitate organizational growth?

And you want to keep growing, right? Because if you stop growing, you wither and die. You either want to do more of what you’re doing, or do what you’re doing better. Or both. And… you can! You should!

Ready to have your mind blown?

There’s a super simple thing you can do to dramatically increase your contributions.

You can easily put this in place before the end of the calendar year — when most donors make their gifts.

Trust me. You’re going to want to read the rest of this article.

Because you’ll learn there’s one thing growing organizations have in common.

And it may surprise you.

Ready?

Growing Organizations Actively Promote Accepting Gifts from Assets

Dr. Russell James J.D., Ph.D., CFP®, professor in the Department of Personal Financial Planning at Texas Tech University, just completed a study reporting on data from 1 million NPO tax returns from 2010 – 2017. This included IRS-released data from e-filed returns of more than 200,000 nonprofit organizations. And guess what it showed in terms of total growth in fundraising contributions over a five-year period (2010-2015) from different types of charities raising $1MM+ (inflation rate combined during this period was 8.5%)?

Received only cash gifts = achieved 11% growth. Just barely kept up with inflation

Received any kind of non-cash gift = achieved 50% growth. Included gifts of personal and real property and deferred gifts.

Received securities non-cash gifts = achieved 66% growth. Massive difference from just this one strategy!

Whoa Nelly!

A 55% difference in growth between accepting just cash and accepting securities.

Your mind should be blown.

You Don’t Have to Get Fancy

The most productive strategy is simply to accept gifts of stock.

Even small organizations experience massive increases in contributions when they accept non-cash gifts, especially securities. In fact, the smaller you are the more difference it makes! Regardless of size, however, the data is impressive.

So if you’ve been shying away from a ‘planned giving program’ because you don’t have expertise on your staff, all you need to learn is how to promote and accept gifts of stock. And this isn’t difficult at all.

Plus, if you don’t even want to accept stock gifts directly, there are Donor Advised Fund programs at community foundations and financial institutions where you can send your donors. Your supporters make a tax-deductible gift there, reap all the benefits of making a gift of appreciated assets (see below), and then recommend a distribution to your charity.

So, no excuses. You need to be promoting acceptance of gifts of appreciated assets.

Why Asking for Asset Gifts Boosts Contributions

It’s partly due to the way the human brain works. There’s a psychological principal known as ‘framing.’ Framing can establish a reference point.

In the context of considering a gift from income vs. a gift from assets, often the suggested ask amount will be a significantly smaller percentage of a donor’s assets (Big Bucket wallet) than a donor’s disposable income (Small Bucket wallet).

When a donor considers a $1,000 contribution against other expenses, it may seem like too large a percentage of their spending money of, say, $8,000/month.

When this same $1,000 is considered as a percentage of total wealth (all cash savings and non-cash assets (shares, personal property, real estate, etc.), the gift may seem a relatively small percentage of investments of, say, $4 million.

Big gift vs. small gift? Hmmn…

Disproportionately large gift vs. readily attainable gift? Hmmn…

Most donors would love to make an outsize impact if they could. And if they have appreciated assets, they can.

Win/win.

The Psychology and Economics of Non-Cash Gifts

Wealth is not held in cash, but in non-cash assets (primarily stocks, bonds and real estate). In fact, per the Russel James study referenced above, cash comprises less than 10% of the collective assets and wealth owned by Americans. This is the SMALL bucket. If you only ask for cash gifts, you’re missing out on a whole lot of potential.

Not only are you missing out; your donors are also missing out. Because you’re not helping them think broadly or see their own potential impact.

Here’s the deal: Behavioral economics research shows when it comes to choices about how much to spend, satisfaction is often driven not by objective amounts but relative comparison. People love to get good deals. They love to leverage their money and get a bigger bang for their buck.

When you ask for gifts of assets, not cash, you’re asking BIG. Most donors like that. Because they benefit both psychologically and economically. By contributing appreciated stock donors can:

Give more than they might otherwise have thought possible.

Perhaps join a higher level giving society than they might otherwise have considered (reaping all the attendant benefits).

Take an income tax charitable deduction (if they itemize),

Avoid capital gains taxes because the stock is transferred without a sale, so a capital gain is not triggered.

Asking for the same gift from assets (where it may represent a very small percentage of the resources in that bucket) will more likely yield a “Yes”.

EXPERIMENT:

Dr. James describes a situation where shoppers entering Broadway Market in Cambridge, Massachusetts were asked one of two questions. The question they were asked had a significant impact on how much they ultimately spent inside the store.

Group 1: “What’s in your wallet/purse? Cash? Credit cards?…

Group 2: “Do you own stocks? Bonds? Certificates of deposit?…

The second group, having been reminded of their wealth, behaved differently. They spent 36% more!

People who feel wealthy spend more.

People Who Give Non-Cash Assets Act More Charitably Over Time

Humans do a mental accounting. They attach labels to financial assets and then treat them differently.

Once you get a donor to make a first gift from non-cash assets, they now consider these assets as a source for potential future contributions. These assets are now labelled as “donation appropriate.”

It’s up to you to guide a donor in this direction, because a $10K gift from securities can be more valuable than the same gift from cash – when this is the first time the donor is making a gift of stock.

Here’s why, per Dr. James and others’ research:

People are more likely to spend irregular, unearned gains (e.g., capital gains on appreciated assets) on luxury goods (O’Curry 1999) and philanthropy in particular (Reinstein & Reiner, 2012; Konow, 2010). than they are regular, earned income.

Framing a donation as an exceptional event removes it from comparison with regular disposable income budget items and increases giving (Sussman, Sharma & Alter, 2015).

BOTTOM LINE: If you learn to ask for gifts from appreciated assets you’ll get more generous gifts. Not just once, but repeatedly.

Cash = Anti-Social; Gifts of Objects = Pro-Social

Sociological research suggests gifts of cash are seen as more anti-social and as placing emphasis on money (emphasizing market-based exchange norms) rather than inter-personal bonds (emphasizing communal norms). Maybe it’s because assets are seen as ‘extra’ and not essential in the way one’s paycheck is. If a donor gives from assets, it’s not going to change the way they live their lives. They’ll still be able to pay for food, shelter, clothing, medicine and all their monthly bills.

Whatever the reason, we’re somehow wired to think gifts of property are more acceptable. For example, when you’re invited to someone’s home for dinner, you bring a gift of wine or candles (not $20).

So… you may as well tap into this psychology.

And… there’s more!

Donor Benefit: Appreciated Asset Gifts Cost Donors Less

They can give more at the same net cost. This can drive long-term increases in giving.

A cash gift brings a tax deduction.

An appreciated asset gift brings the same tax deduction PLUS avoidance of capital gains taxes on the appreciation. And this benefit extends even to folks who don’t itemize.

In addition, with the new tax law going into effect for 2018, donors who previously deducted capital gains taxes on their state income tax returns (80% of states) will no longer be able to do so. So savings from not having to pay these gains taxes have increased significantly.

And… there’s more!

Donor Need Not Change Their Portfolio

This is one of my favorite strategies. Tell your donors they can give $10,000 in stock to your charity and use the $10,000 in cash (that they would otherwise have donated) to re-purchase the stock – thereby wiping out all the appreciation/capital gains liability and increasing the cost basis from this day moving forward.

So when they ultimately do sell the stock, they’ll pay less taxes.

This is a way to be super helpful to your donor, while at the same time generating a significant gift.

And… there’s more!

You’re Walking the Donor-Centered Fundraising Talk!

Donor centricity is the sine qua non of growing organizations.

If you’re set up to accept appreciated assets you’re making giving more beneficial. It’s a bit more hassle for your charity, but… if you want to walk the talk of donor centricity this is something you should seriously consider. If you don’t do it, another nonprofit will.

One great technique is simply to showcase other donors making gifts of appreciated assets. This triggers the psychological principle of social proof. Social norms are powerful. People ask: “Do people like me do things like this?”

Well, in fact, they do!

EXPERIMENT: Dr. James describes a situation where donors were presented with two different scenarios:

Group 1: “This is how Sara benefited from establishing a Charitable Gift Annuity”…

Group 2: “This is how you might benefit from a Charitable Gift Annuity”…

The research showed folks in Group 1 made larger gifts. They were swayed by ‘social proof.’ In fact, if you can age-match the example (Sara’s age compared with donor’s age) responses will increase. The more you show folks people like them think this is a good strategy, the more likely they are to follow suit.

What Should Your Nonprofit Do Next?

Set up a least one brokerage account

Often you can find a broker willing to offer discounted fees for nonprofits. When donors let you know they’re willing to make a stock gift, simply send them instructions that tell them precisely what to do:

Decide which stock and the number of shares you wish to transfer to (provide your organization’s legal name).

Provide written instructions to your broker to deliver those shares to the following account that has been established for (provide your organization’s legal name). [Include account number; direct transfer number; broker name and company; phone, FAX and email].

Copy your letter of instruction to [Name and contact information for someone at your organization].

Also let donors know if they prefer to use their own broker you are willing to set up an account with their preferred brokerage. Be sure to let them know, however, you use the broker you do because they give you a preferred rate.

Include a sub-menu on your donation page for making gifts of appreciated stocks

Remember, you’re the one that needs to plant this idea. If donors see this on other charity websites, and not on yours, they’ll assume you don’t accept stock gifts.

Here are some charities who are rocking this online:

Save the Children. They include a chart summarizing the differences between simply selling $5,000 of stock in order to make a cash gift, making an outright $5,000 cash gift, or making a $5,000 appreciated stock gift. The after-tax benefits show the clear winner to be the direct stock gift.

Give fundraisers extra tools and rewards to raise gifts of assets

This makes good economic sense. Remember: According to the landmark Russell James study, organizations that receive non-cash gifts grew 50 – 66% in the last 5 years compared to nonprofits that accept only cash that grew only 11%. The fascinating part is this is partly due to the way our brain works, or how mental framing works. When fundraisers ask for cash, they are asking from the ‘small bucket’ because wealth is not held in cash. This makes a psychological difference because it changes the reference point for the gift. A donation might seem too big when compared by a donor to other expenses, but potentially too small when compared with non-cash assets (shares, properties, etc.).

Donors may never have considered giving from wealth rather than from spare income. Knowing this is not only possible, but easy, gives them freedom to be generous.

Research demonstrate people are much more willing to make charitable donations from irregular, unearned rewards (their investments are appreciating while they sleep!) than from regular work earnings.

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